An update on the Renters (Reform) Bill
On 8 July 2022 we published an article explaining the Government’s White Paper that was published on proposed reforms to the private rental sector. That article can be found here.
In May 2023 there was a 116% annual rise in “no-fault” section 21 evictions, and there have been further calls to implement the proposals as soon as possible.
There have been some significant changes since the White Paper. We summarise the key updates below, although we expect more changes to be made as the bill goes through the House of Lords and House of Commons.
- Abolishment of section 21 ‘no fault’ evictions and new grounds for possession
The Government has explained that “removing section 21 will level the playing field between landlord and tenant, empowering tenants to challenge poor practice and unjustified rent increases, as well as incentivising landlords to engage and resolve issues”.
The removal of section 21 will be done in two stages:
- After 6 months from implementation of the bill, new tenancies will not be allowed to use section 21.
- At least 12 months later, old tenancies will not be allowed to use section 21.
Landlords will still be able to obtain possession by using section 8 of the Housing Act 1988, which allows possession based on specific grounds. Each ground has its own set of requirements, which have been significantly amended under the proposed bill. For example, for possession on the ground of rent arrears, currently only 2 weeks’ notice needs to be given by the Landlord. This is set to be increased to 4 weeks’ notice.
Some grounds have been scrapped entirely, such as possession to use the property as a holiday let, and there are new grounds such as where the Landlord wishes to sell the property, the superior lease has come to an end, or the Landlord requires the property for use by an employee.
2. Periodic tenancies
6-month initial terms are due to be scrapped. All new and existing tenancies will move to periodic tenancies and the maximum period will be up to 28 days or one month
The Government has explained “This will enable tenants to leave poor quality properties without remaining liable for the rent, or to move more easily when their circumstances change, for example to take up a new job opportunity”.
This change will be implemented in two stages:
Stage 1 – six months’ notice of the first implementation date. All new tenancies will be periodic and governed by the new rules.
Stage 2 – at least 12 months after the first implementation date, any previously agreed fixed terms will not apply.
Although this new regime will not apply to purpose-built student accommodation, any other student lets will be. This may cause problems for private landlords who rely on fixed term tenancies for a turnover of students each academic year. Abolishing no-fault evictions and fixed term tenancies mean a student could remain in situ when the new academic year begins, causing the Landlord to breach a contract they have with the new student intake. The Government is considering a specific clause for private student accommodation to allow landlords to regain possession at the end of the academic year, and we await further information on this.
(3). Rent increase restrictions
As discussed in our previous article, the government plans to restrict rent increases to once per year, and the notice period increased from one month to two.
Under the new proposals, tenants will be able to challenge the rent in the first 6 months of the tenancy by going to the First Tier Tribunal (FTT). The FTT will look at the open market rent in deciding each case.
This means that a tenant could accept a new tenancy, and then within the first 6 months complain to the FTT about the rent, which introduces a certain level of rent control that hasn’t existed in the past.
(4). Pets
The new proposals are that there will be an implied term in all tenancies that a tenant can keep a pet with the Landlord’s consent unless the Landlord reasonably refuses. The Tenant must apply in writing with a description of the pet, and the Landlord must respond in writing within 42 days. The Court will have the power to order specific performance of the obligation not to unreasonably refuse the tenant’s request for a pet.
The Landlord will be permitted to take out pet insurance to protect against any damage caused to the Property, which can be recouped from the tenant as a condition of consent.
(5). Ombudsman/Landlord Redress Scheme
Although this is in the bill, no date has been confirmed as to when it will be introduced, so we do not expect it to be introduced any time soon.
However, if and when it is implemented, this will be a major change to the private rental sector. Membership will be mandatory, or landlords will face a financial penalty of up to £5,000.
The ombudsman will have powers to “put things right for tenants”, including compelling landlords to issue an apology, provide information, take remedial action, pay compensation of up to £30,000, require landlords to reimburse rent to tenants where the “service or standard of property they provide falls short of the mark”.
More details are needed as to how this will work and who the ombudsman would be.
6. Private Rented Sector Database
Again, this proposal does not have a date for implementation, so we do not expect it to be introduced any time soon.
It is proposed that Landlords will need to register their properties and properties will not be able to be marketed otherwise. Fines will be imposed on landlords who rent properties out without registering them.
More information is to come on exactly how this will work in practice, but this adds another element of administration for landlords and, if implemented, will mark another huge change to the private rental sector.
The proposed reforms have come along quite a bit since the White Paper last year, but they still have a long way to go before being implemented into law.
However, the government hopes that the bill will have royal assent this year, and the Labour party have confirmed that they will implement a similar regime if they come into power at the next election.
As explained in our previous article, the proposed reforms in the White Paper appeared to be very tenant-friendly. The updates have balanced this somewhat, with more clarity on how Landlords can obtain possession in the absence of section 21. However, it is important that Landlords consider the impact these reforms may have on their rental portfolios and understand their obligations under the proposed reforms.
BPE’s Litigation team are well placed to provide strategic legal advice on all aspects of property litigation. Should you require our support, please contact Natalie on 01242 248223 or natalie.mcmahon@bpe.co.uk
Further reading:
The current version of the Renters (Reform) Bill can be found here.
These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.
